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Who’s Responsible for ADA Compliance— Landlords or Tenants? BY DAVID WARREN PETERS CONSIDERABLE MISUNDERSTANDING HAS ARISEN between com- pened to be sued. Some landlords have also taken on obli- mercial landlords and tenants about the responsibility of gations that should have been borne by (or at least shared each for compliance with laws—as well as the defense and with) their commercial tenants. settlement of lawsuits—relating to access for the disabled, The failure to have all necessary parties involved in an under terms of many common commercial leases. ADA/access lawsuit at the earliest possible point will most Misconceptions about the obligations of commercial tenants likely result in unnecessary and avoidable expense to all under many standard commercial “triple net” and other involved. For example, even if a tenant had an obligation to leases have caused many firms to close, dismiss employees, defend a lawsuit, to the extent the lawsuit seeks injunctive or file bankruptcy—in many cases unnecessarily. relief (ie, a court order, for example, requiring that structur- This article concludes that (1) in most cases, neither land- al renovations be made), the tenant might not have the legal lords nor tenants will be able to state, as a matter of law, that right to make such renovations. Similarly, if a landlord is they are relieved from their responsibility to provide access the sole defendant in a lawsuit and part of the resolution for the disabled, and (2) the standardized terms of many—if requires that the restroom not be available to the public, if not all—common commercial leases most likely will not, in the tenant is not a party to the proceedings, s/he may object themselves, be sufficient to transfer this obligation from one to such a reduction in their leasehold rights. to the other. For these reasons, commercial landlords, ten- Too often, the parties realize too late that an essential party ants and others may well be indispensable parties in ADA has been omitted from a case, and that party will, quite (the Americans with Disabilities Act of 1990, 42 USC appropriately, object to being brought in at the “last §12101) and access lawsuits, and leases should be immedi- minute” when important decisions may have been made ately revised to clearly confirm responsibility for compliance without them. Because a plaintiff may well be entitled to an with access laws. award of attorneys fees during the entire time the defen- dants try to sort out responsibility, it is essential that all con- 1. WHAT CAN HAPPEN IF AN ESSENTIAL PARTY IS NOT INCLUDED IN AN ACCESS LAWSUIT ceivably appropriate parties be joined in an access lawsuit at Many have suggested that a major part of the current crisis the earliest possible opportunity, even if some are later dis- of ADA/access lawsuits is the misunderstanding between missed. landlords and tenants as to which of them is responsible for complying with access laws or defending lawsuits involving them. Many tenants have mistakenly undertaken the defense About the Author of lawsuits, and even made major structural renovations, Attorney David Warren Peters is Vice President and General because they incorrectly believed that their leases required Counsel of The Ascervus Group of Companies and the devel- it; others just started defending lawsuits because they hap- oper of ADAlawsuits.com.(E-mail: firstname.lastname@example.org) REAL ESTATE ISSUES 16 SUMMER 2004 Who’s Responsible for ADA Compliance? Defendants should not assume that a plaintiff has joined surprised to discover that those originally thought to be all necessary parties in an access lawsuit; while there is a responsible for access issues may not, in fact, be liable, strong incentive to do this in non-access cases, a plaintiff while others initially overlooked should be joined. is probably not required to research all possible defen- 4. AMBIGUITIES IN THE LEASE WILL GENERALLY BE dants and consider documents (to which they may not CONSTRUED AGAINST THE PARTY WHO PREPARED have access when the suit is filed) just to gain access to IT commercial premises.1 They may be entitled to sue just Many landlords have tried to convince tenants that they one party doing business on the property; the party they have taken on the responsibility of making fundamental sue has the right to bring in other parties responsible for structural improvements to the landlord’s property (which the harm, and should consider joining them at the earliest would increase the value of the property when returned to possible opportunity to avoid irreparable harm. the landlord at lease-end), simply by virtue of the tenant having signed a fairly standard commercial “net” lease 2. JOINT AND SEVERAL LIABILITY OF COMMERCIAL agreement. Because commercial tenants indeed take on LANDLORDS AND TENANTS FOR ACCESS many obligations of the property owner when they enter IMPEDIMENTS many commercial leases, they often incorrectly assume In general, landlords and tenants are jointly responsible that they have undertaken all of them, or that they are for compliance with access laws, at least from the stand- responsible for “everything inside the exterior walls.” point of third-parties (eg, disabled visitors to the proper- ty); however, they are free to shift the allocation of respon- It is a well-settled legal principle that ambiguities in a doc- sibility between them by contract.2 Of course, such a re- ument will generally be construed against the party who allocation is only binding as between the landlord and drafted (ie, prepared) it. The reason for this is that the tenant3—a disabled plaintiff will generally have recourse party who prepares a document is in the better position to against both of them, and if just one of them is sued, or make it as clear and unambiguous as possible; additional- found liable, s/he may have a claim against the other for ly, the non-drafting party may not always be in a position indemnity and/or contribution (ie, a legal action to recov- to meaningfully negotiate the terms. er losses that are another’s responsibility). The rationale Typically, because most commercial leases are drafted by for this policy is that it would be unfair to a disabled the landlord, matters of uncertainty will often be con- plaintiff if a landlord tried to avoid making access renova- strued in the tenant’s favor because the landlord would be tions by leasing only to tenants with limited resources or seen as having more time and opportunity to clarify for tenants to avoid taking responsibility for removing uncertain terms, and the tenant might have less ability to access barriers over which they have complete control. bargain. Accordingly, unless the tenant expressly agreed in writing to make specific structural renovations to the 3. DON’T ASSUME YOU HAVE FULL (OR ANY) RESPONSIBILITY FOR THE LAWSUIT property, many attorneys do not believe that relatively Too often, a party is sued, assumes they are at fault, and standardized provisions, like those found in many com- just starts defending the lawsuit. Sometimes they are cor- mercial “net” leases, transfer the landlord’s obligation to rect; often they are not. More commonly, there are a make significant access improvements to the tenant. number of individuals and firms that may bear some responsibility for the problem, and the participation of 5. WHAT DOES THE LAW SAY? multiple defendants can ease the burden of resolving any As of the date of this article, many jurisdictions lack deci- access case considerably. sive case law that confirms the respective responsibility of landlords and tenants under standard commercial leases; It is essential to consider which parties should be included additionally, commercial lease terms vary considerably, in a lawsuit at the earliest possible opportunity. For exam- despite the fact that they are usually referred to as “stan- ple, because some insurance companies will cover some dard.” A surprising number of leases still in use do not ADA/access claims and others will not, one party or address the responsibility for access compliance and another may have insurance that will cover a claim while claims, and this obligation is substantially different from another may not. As facts emerge in a case through the other obligations the tenant may assume, as discussed exchange of documents and information, parties are often below. Certainly, any landlord and tenant can agree that a REAL ESTATE ISSUES 17 SUMMER 2004 Who’s Responsible for ADA Compliance? tenant will make specific structural modifications to the visible to the naked eye and the regulations relating to property, but the question in most access lawsuits is them are matters of public record. Indeed, many busi- whether the standardized terms commonly found in com- nesspeople make their own accessibility inspections and mercial net leases would in fact transfer the obligation to renovations without the use of experts, and sometimes do the tenant without such an express agreement. it properly, based solely on the diagrams and guidance in the ADA Accessibility Guidelines (“ADAAG”), state build- Because most commercial leases rarely identify specific ing codes and other similar sources. Of course, such “self access improvements the tenant agrees to make, many help” can also result in costly mistakes. landlords have tried to claim that standard commercial lease terms require the tenant to make such improvements The fact that the overwhelming majority of access impedi- by implication (ie, based on cases that have interpreted ments are visible to both landlord and tenant, and each certain standard lease terms to require the tenant to are deemed to be “on notice” of the access laws means, for undertake certain renovations, which were unknown at practical purposes, that both landlord and tenant “knew” the time the lease was executed). Of course, an important (or should reasonably have known) that the property was difference between the facts in these cases and most noncompliant at the time it was leased (or the lease ADA/access cases is the fact that the need for access reno- renewed) and knowingly failed to make written arrange- vations is usually apparent to the unaided eye, and both ments for any structural renovations that were required. landlord and tenant are equally charged with knowledge Under these circumstances, it seems reasonable to assume of the noncompliance of the facility; accordingly, there is that the tenant agreed to comply with all laws within the no “surprise” as there is in the cases on which many land- confines of the premises s/he leased, but not to improve lords have tried to rely (as discussed below). them by making significant structural renovations, unless the parties expressly entered into a clear written agree- In one California case, Botosan v. Fitzhugh4 held that one ment providing exactly for that. Many judges may be commercial lease for a chain “fast food” restaurant did not reluctant to invest valuable court time considering an transfer responsibility for access improvements from land- issue the parties were free to address for themselves when lord to tenant, based on the standard “compliance with they entered the lease—at least to the extent that the land- laws” provisions it contained. Since Botosan, many land- lord wants the court to interpret a broader obligation for lords have attempted to claim that other provisions in the tenant than the plain reading of the document they standard commercial leases somehow operate collectively prepared might create. to shift this burden in situations where there was no clear agreement about responsibility for specific structural ren- 5A. THE LEGAL FRAMEWORK ovations that needed to be made. Because many of the As of the date of this article, commercial landlords may ADA compliance disputes between landlords and tenants still be unable to point to a case or law that allows them to arise in smaller properties, they are less likely to be litigat- transfer responsibility for access law compliance to their ed. Unfortunately, this forces consideration of similar, but tenants through the standardized general terms of most not identical cases, that may not be entirely comparable. commercial leases—the matter will most likely remain an In California, the cases that currently come closest to pro- arguable question of fact a judge or jury would have to viding guidance on this question differ from ADA/access decide. For this reason alone, most commercial landlords cases in at least one critical respect—each of them deals and tenants will most likely be necessary parties in many with relatively concealed defects in the property that access lawsuits. Because the terms of commercial leases would most likely not have been identifiable to the casual vary considerably and the conduct of the parties will also observer at the time the lease agreement was signed. One have considerable bearing on this question, it is unlikely case involved a structural seismic retrofit and the other that any landlord or tenant will be able to claim that, as a involved the removal of friable asbestos, each problem was matter of law, they are entitled to look to the other to take discovered some time after the lease agreement was responsibility for making access improvements to the signed. In each case, the problems in question would property, unless they have entered into a clear, express most likely not be ascertainable without the aid of experts. agreement for this purpose (which is often not the case). In contrast, virtually all common access impediments are REAL ESTATE ISSUES 18 SUMMER 2004 Who’s Responsible for ADA Compliance? 5B. HAS THE LANDLORD BEEN RELIEVED OF THE responsibility (which is presumed to reside with the land- OBLIGATION TO PROVIDE ACCESS? lord) had been transferred to the tenant, in light of The starting point in any analysis must begin with the Sections 4 and 5b, above? premise that the landlord never loses the obligation to provide access to the property—public policy requires that Two California cases provide guidance as to some of the some party be continuously responsible for health and issues courts consider relevant in resolving disputes over safety issues for any given property. In many jurisdictions problems that were unknown to both landlord and tenant including California, this obligation is presumed to rest when the lease was signed: with the landlord,5 and the landlord may contract with n Hadian v. Schwartz 7 confirmed that a commercial others (including tenants) to fulfill this obligation, but will tenant who had renewed a three-year lease for an never be relieved of it with regard to the claims of third additional five-year period had not assumed the parties (such as disabled visitors). Of course, if the tenant obligation of paying for a seismic retrofit required makes fundamental changes to the leased premises, s/he by the City of Los Angeles solely by virtue of having may take on the obligations of the landlord with regard to executed a standard “fill-in-the-blanks” commercial those changed areas for claims of inaccessibility by dis- net lease. abled visitors to the premises.6 While the tenant(s) would certainly have undertaken the obligation to provide barri- n Brown v. Green8 held that commercial warehouse er-free access within the areas leased to them, is there evi- tenants did assume the responsibility for removing dence that the tenant agreed to take on the additional obli- asbestos-laden material from a building, even though gation of making structural improvements to the proper- such renovation would inure to the landlord’s long- ty, which would return a better building to the landlord at term benefit, when the tenants, who were particularly lease-end than was received? sophisticated in commercial leasing, had been advised in advance of the possibility that such con- 5C.GUIDANCE FROM NON-ADA CASES tamination might exist and declined to inspect for it, ADA/access cases are a fairly recent phenomenon, while nevertheless signed a long-term lease in which a disagreements between landlords and tenants over respon- majority of the risks of ownership were expressly sibility for repairs have persisted for centuries. While cases shifted to the tenant. interpreting these disputes will most likely not resolve all The Hadian and Brown cases were decided the same day landlord/tenant issues in an ADA/access lawsuit, they can and reached different conclusions. Both cases were decid- provide limited guidance until more applicable cases ed by the California Supreme Court, and the Court become available. An essential distinction between this applied many of the same factors to each case. In each line of cases and most ADA/access lawsuits is that the case, the specific facts and circumstances (including the defects in these cases were concealed or otherwise not like- conduct and experience of the parties and the specific lan- ly to be seen by the casual observer, as they are in guage of the lease) determined the outcome of the case. ADA/access lawsuits. As stated above, each of these cases involved “surprises” In access cases, there can usually be no question that any that were discovered during the term of the lease—quite party visiting the property would have had to look at—if different from the access obligations, of which landlords not physically pass through—the same path of travel a and tenants have had at least “constructive” notice for disabled visitor would use. Thus, it would be rare for any some time. access impediment not to have been seen by even the most casual visitor (even if not understood to be an arti- 6. WHY IT IS IMPORTANT TO DETERMINE THE EXACT PROBLEMS THE DISABLED VISITOR cle), and both landlord and tenant are deemed to have ENCOUNTERED ON THE PROPERTY “constructive” (imputed) knowledge of all access laws and Basically, most access lawsuits are filed because a disabled regulations. Accordingly, if both the landlord and tenant plaintiff claims they encountered difficulty entering a must be presumed to know of a problem and declined to facility or had problems once inside. Because disabled clearly confirm the responsibility for remediating it in the plaintiffs are not required to attempt to enter premises agreement between them, how can we assume that the that appear physically inaccessible,9 they will often do a REAL ESTATE ISSUES 19 SUMMER 2004 Who’s Responsible for ADA Compliance? “drive by” and properly determine that access impedi- vations which would improve the property the landlord ments make entry potentially dangerous. Nevertheless, will receive back at lease-end, or to defend lawsuits result- the lawsuits they file are often replete with references to ing from structural inaccessibility. This question was the barriers inside the premises. This is because they may addressed in Botosan10 where the relevant provision of the have a friend or a scout enter the premises to gather infor- commercial lease stated “Tenant shall . . . keep and main- mation about problems inside. tain . . . the Premises . . . in compliance with all laws and regulations . . .”. The Botosan court considered a number The significance of identifying the specific obstacles the of common provisions of commercial leases, which were plaintiff actually encountered can prove fairly important also found in the lease in question, including one which in apportioning liability between landlords and tenants in required the tenant to obtain the landlord’s approval for access lawsuits. For example, if the plaintiff revealed that any major renovations to the leased premises; based on s/he made a determination from the appearance of the these, they rejected the landlord’s claim that the responsi- exterior that entering business premises was unwise or bility for access compliance had been shifted to the com- potentially dangerous, it might support an inference that mercial tenant, in this case, a small Mexican restaurant all, or substantially all, of the cost or liability of the access that was part of a chain. The Botosan court went on to lawsuit should properly be borne by the landlord. say “ . . . even if the lease allocated all responsibility to the Likewise, if all of the access impediments complained of tenant, that would not insulate [the landlord] from liabili- by the plaintiff were of a structural nature (eg, matters ty under the ADA. Under the ADA liability attaches to that existed on the property the day the tenant took pos- landlords and tenants alike.” Based on the foregoing, if session), a similar result could be reached. However, if it landlords want such “compliance with laws” provisions of appeared that the building and property were not the leases to be construed to require tenants to make funda- problem, but a rolling rack or moving palette blocked mental structural improvements to the leased premises (ie, access on the day in question, a majority (if not all) of the improving them over the condition in which they were liability might be borne by the tenant. In many cases, it received)—and not just to obey all laws in conducting will be a combination of factors—some the responsibility their operations—they should make this conspicuously of the landlord and some the responsibility of the ten- clear in the agreements they prepare. ant—which result in access claims; understanding exactly which problems led to the claims is essential to any later 7B. “TENANT SHALL INDEMNIFY LANDLORD FOR apportionment of liability between landlord and tenant. ALL CLAIMS ARISING OUT OF TENANT’S USE OF THE PROPERTY” 7. COMMON LEASE PROVISIONS: Many commercial landlords have attempted to persuade Several common lease provisions, particularly those found tenants that they are required to indemnify them for in commercial “triple-net” leases, contribute to the misun- access claims, even if there is no evidence that the claim derstanding between landlords and tenants as to which of resulted from any act or omission by the tenant—for them is responsible for renovations and compliance with example, if the plaintiff just did a “drive by” and was dis- access laws: couraged from entering by the structural inaccessibility of the premises (and not, for example, some impediment the 7A. “TENANT IS RESPONSIBLE FOR COMPLYING tenant had introduced to the property). WITH ALL APPLICABLE LAWS” A common provision of many commercial leases is a In many states, it is well settled that one cannot seek requirement that the tenant comply with “all applicable indemnification for one’s own negligence.11 To the extent laws.” A plain reading of such provisions requires that the a property owner has failed to comply with applicable tenant not violate the law in the things they do within the access laws or regulations, s/he may not be entitled to areas they are leased. demand indemnification from a tenant, when the decision to refrain from making access renovations on an ongoing Some landlords have suggested that such a provision basis may be deemed to be a conscious, deliberate and/or requires the tenant to make fundamental structural reno- intentional one.12 Thus, the question is whether the claim REAL ESTATE ISSUES 20 SUMMER 2004 Who’s Responsible for ADA Compliance? arises out of the tenant’s use of the property or the land- 8. IS THE PROPERTY EXEMPT FROM COMPLIANCE lord’s ongoing negligence in failing to renovate it. Clearly, OR “GRANDFATHERED”? the analysis in Section 6, above, becomes more relevant in A striking number of defendants incorrectly believe that cases like this. their properties are exempt from compliance with access laws (because they have been “grandfathered” in some A tenant or franchisee in an access case should also con- respect) because they are of a certain age, or because no sider a cross-claim for “equitable indemnity” against the major renovation has ever been performed. While it is landlord or franchisor, even if there are provisions in the not the intention of this article to provide legal advice lease or franchise agreement whereby the tenant/fran- about specific renovations that are required for any partic- chisee agrees to indemnify the lessor or franchisor. In ular property, the reader is reminded that: many cases, the tenant or franchisee will read provisions whereby they have agreed to indemnify the landlord or n The ADA requires removal of such access impedi- franchisor and incorrectly conclude that they have under- ments as are “readily achievable” for the defendant,13 taken an unqualified obligation to indemnify them for any there is no “exception” or “grandfather” provision and all claims, including the landlord’s or franchisor’s neg- exempting older properties. ligence. As discussed above, however, a landlord or fran- n The ADA and attendant regulations confirm that chisor may be partially or fully responsible for the harm what is “readily achievable” depends on the total from which the claims arise, and such indemnification financial resources of both the commercial tenant and provisions may well not require the tenant/franchisee to property owner,14 and would presumably include indemnify the landlord or franchisor from their own neg- equity in the property. Many defendants read this ligence. The problem, of course, is that if the tenant or and think they will assert the defense that a particular franchisee does not assert these claims early in the lawsuit, renovation was not “readily achievable” for them they may be barred. because it was too expensive or complicated; once they find out they will have to produce their financial 7C.THE REPAIR COVENANT statements to support this argument, they often re- Although a tenant’s covenant to repair and maintain the evaluate this position, but only after considerable property, usually at the tenant’s expense, is a common time and legal expense. Assuming all appropriate provision in many commercial net leases, the Hadian and defendants are joined in an action (see Section 10, Brown courts each considered this obligation in their below), and considering the vast increase in equity analysis. Because a requirement to repair or maintain the that has applied to commercial real estate in many property may under certain circumstances be interpreted parts of the country, it may be difficult to argue that to require the tenant to repair the item in a manner that almost any barrier removal was not “readily achiev- causes it to comply with current law, some landlords have able” at many properties. tried to argue that the tenant should be required to improve non-complying areas of the property by bringing n Certain state laws enhance the power of the ADA, and them up to current accessibility standards (ie, that the should not be overlooked; for example, California’s inaccessible areas of the property are “broken” and it is the Unruh Act provides that a violation of the ADA (and tenant’s obligation to “fix” them). The analysis in Hadian presumably the ADA Accessibility Guidelines, or and Brown, above, confirms that such arguments may be “ADAAG”) constitutes actionable discrimination.15 ambitious, at best. In addition, additional clauses, such as (1) the tenant’s obligation to return the property to the 9. THE NEED TO REVIEW, AND REVISE, LEASE landlord in substantially the same condition to the land- AGREEMENTS lord, and (2) limitations on the tenant’s right to make sig- More than a decade after the passage of the ADA, a nificant structural (or any unapproved) modifications, can remarkable number of leases remain silent about the allo- provide important clarification of this question. cation of responsibility for complying with access laws and regulations, and/or the lawsuits for noncompliance. The time may be fast approaching, if it is not already here, when courts will have lost sympathy for any party who REAL ESTATE ISSUES 21 SUMMER 2004 Who’s Responsible for ADA Compliance? doesn’t make advance written arrangements clearly appor- n Lawyers (to the extent they prepared commercial leases tioning responsibility for access matters; the ADA is here since the access laws in question were enacted that did and is not going away. If landlords want to shift this bur- not address the issue of responsibility for access renova- den to tenants, they will need to do so through particular- tions and defense of access lawsuits); ly clear and conspicuous terms. n Lawyers in previous access lawsuits on the same prop- erty or issue (to the extent they demanded fewer reno- 10.RULING OUT ALL POTENTIAL CO-DEFENDANTS vations than were actually necessary/required in Initial defendants should consider all of the following cat- exchange for a larger payment to their clients or them- egories of potential defendants in a lawsuit before con- selves, and sought or received fees based on an assertion cluding that they are solely responsible for defending it (of that their work was responsible for a significant benefit course, this list is not all-inclusive): to society under, for example, “Private Attorney n Architects and other design professionals (depending General” provisions like California’s Code of Civil on the date of the design and the agreement of the par- Procedure § 1021.5); ties); n Municipalities (depending on when building permits n Coastal, district and other agencies and commissions were issued and whether compliance with applicable (to the extent they prevent necessary/appropriate reno- access laws was expressly disclaimed, to the extent not vations from being made, or failed to require them dur- immune from suit); ing the approval process, and to the extent they are not n Plaintiffs (to the extent they engaged in intentional immune from suit); conduct that could create or exacerbate their harm); n Contractors (depending on the date of n Previous occupants (to the extent they took, or construction/renovation and whether the contractor refrained from taking, actions that had a material was responsible for causing the work to comply with impact on the accessibility of the property or failed to access requirements); comply with access laws); n Experts in previous access cases (to the extent they n Property Owner(s), who, in most cases, would never be failed to identify appropriate renovations and the law relieved of the obligation to the disabled community to has not changed with regard to the claims in the cur- cause their properties to comply with access laws; rent lawsuit); n Realtors (to extent noncompliance with applicable laws n Franchisors (to the extent they designed/built premises was not disclosed; or appropriate inspections were not in question, dictate operating policy at franchisee’s recommended); facilities, inspect for violation of laws/compliance with regulations, have renewed franchise agreements with- n Sellers (to the extent notice of noncompliance with out requiring compliance since the accessibility laws in applicable laws, or prior lawsuits, were not disclosed or question were enacted, etc.); if they failed to comply with applicable access laws); and n Historic site board(s) (to the extent they made determi- nations about renovations that would be required or n Tenants, who would never be relieved of the obligation allowed after applicable access laws were enacted, or to comply with access laws, at least within that portion refuse to permit a property owner to make necessary of the premises they occupy. access renovations, to the extent not immune from Based on all the foregoing, it is essential that all necessary suit); parties be involved in the resolution of an ADA/access n Landlords (to the extent the landlord is different from lawsuit at the earliest possible opportunity. the property owner and/or has engaged in activity (including without limitation a decision to refrain from 11.SPECIAL CONSIDERATIONS FOR FRANCHISES removing access impediments) that could be claimed to Many franchise chains have been especially hard-hit by be discriminatory to the disabled); ADA/access lawsuits. In some cases, this is because fran- REAL ESTATE ISSUES 22 SUMMER 2004 Who’s Responsible for ADA Compliance? chise chains are perceived to have greater financial al, state and local standards, ensuring that construction resources available to meet accessibility obligations, or to irregularities don’t form the basis for future claims, regu- pay judgments. larly inspecting for vandalism and keeping up with the constant stream of changes in standards—can be an over- Many franchise chains have made commendable progress whelming task for access professionals, much less those in ensuring compliance standards in each of their loca- who find running their businesses to be more than a full- tions while others, astoundingly, have done almost noth- time job. An ADA/access lawsuit will not make things ing. Worse still, many new locations do not meet applica- simpler. A business that has not been sued has an invalu- ble access standards and are subject to suit virtually from able opportunity to save tens, if not hundreds, of thou- the day they open. sands of dollars by taking immediate action. Remarkably, many of these franchisors have taken the The first step in preventing, or resolving, an ADA/access position that the franchisee must bear the financial lawsuit is to have the property inspected by a highly quali- responsibility for access lawsuits, even though the basis for fied inspector. It is extremely important that the inspector the lawsuit relates directly to the franchisor’s design or be retained through an attorney so that the report is pro- policies. Many franchisors have attempted to invoke tected by the attorney-client and/or attorney work prod- indemnification provisions to require the franchisee to, in uct privileges; without such protection, the report can be essence, indemnify the franchisor from the franchisor’s obtained in any future lawsuit, and could be deemed own negligence (see Section 7b, above). Such positions notice of noncompliance. should be carefully scrutinized in that it is usually the franchisor who: While it has always been riskier to do business or hold property in one’s own name, the increase in access litiga- (1) designed, approved and/or built the structures on the tion make it even less advisable. Because the obligation to property, make renovations can depend upon the financial (2) regularly inspects the property for compliance with resources of the defendants, defendants with significant laws (surprisingly, though, access laws are often not part of financial resources are particularly at risk. Accordingly, these inspections), and property owners should consider holding the property in a separate limited liability company (“LLC”) or a limited (3) imposes contractual provisions prohibiting changes to partnership with a corporate general partner. Commercial the property without franchisor approval. tenants should also consider doing business as a corpora- Often, franchisees are immediately cited for violations that tion or LLC. could injure the non-disabled, but violations of decade- Business owners need to understand that there is generally old access laws are ignored, so lawsuits often come as a no limit to the number of times they can be sued about complete surprise to the franchisee. even minor non-compliance with access laws. The num- Franchisors should immediately institute chain-wide com- ber of “professional plaintiffs” seems to increase on a daily pliance requirements, certainly for the renewal of franchis- basis, and judges are becoming increasingly reluctant to es, but franchisees should not wait for franchisors to do shelter firms that have ignored a law passed in 1990. this—a lawsuit may already be pending. Franchisees Businesses should evaluate access renovations in terms of should demand that franchisors play a strategic role in the considerable cost of litigating the failure to make chain-wide access renovations, because they can accom- them. Landlords and tenants—and especially fran- plish such renovations far more cost-effectively than indi- chisors—should all work together to prevent a problem vidual franchisees. Because the renovations will make the from becoming a crisis.n properties more valuable, the property owners should also play a financial role in the process. 12.THE NEED FOR IMMEDIATE ACTION Anyone who has completed accessibility renovations knows it can be an overwhelming task—reconciling feder- REAL ESTATE ISSUES 23 SUMMER 2004 Who’s Responsible for ADA Compliance? ENDNOTES 1. Independent Living Resources v. Oregon Arena Corp, 982 F. Supp 698, 768 (D. Or. 1997) supplemented 1 F. Supp 2d 1159 (D. Or. 1998) 2. Botosan v. Fitzhugh 13 F. Supp 2d 1047, 1054 (S.D. Cal 1998) 3. A number of jurisdictions have laws that support this principle, as one such example, California Civil Code §3513 confirms that “. . . a law established for a public reason cannot be contravened by a private agreement.” 4. Botosan, infra. 5. Glenn R. Sewell Sheet Metal v. Loverde (1969) 70 C2d 666, 672 n6, 75 CR 889 6. Sewell, infra 7. Hadian v. Schwartz (1994) 8 Cal 4th 836; 35 Cal Rptr. 2d 589; 884 p2d 46 8. Brown v. Green (1994) 8 Cal 4th 812; 35 Cal Rptr 2d 598, 884 P2d 55 9. 42 USC §12188; also see Pickern v. Holiday Quality Foods 2002 293 F. 3d 1133 10. Botosan at 1053 11. For example, in California Rooz v. Kimmel (1997) 55 Cal App 4th 573; 64 Cal Rptr 2d 177 and it’s progeny provide considerable guidance; an exception to this rule is that when a contract expressly provides that a party will be indemnified against that party’s own negligence, as is the case in insurance policies. In such cases, however, the requirement that a party is being indemnified against his/her own negligence must be very clearly and expressly stated, as is rarely the case in most commercial leases. Even then, strong considerations of public policy my over- ride such provisions, particularly when the indemnitee has foreknowledge of a problem that could trigger indemnification, as in Westlye v. Look Sports, Inc., (1993) 17 Cal App 4th 1715. 12. Modern Development Company v. Navigators Insurance Company (2004) 111CA4th 932 13. The Americans with Disabilities Act of 1990 42 USC 12101; specifically §12182(b)(2)(a)(iv), (v) and (vi) 14. 42 USC 12181(9) 15. California Civil Code § 54(c) REAL ESTATE ISSUES 24 SUMMER 2004
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